Consider Two Firms Competing to Sell a Homogeneous Product by Setting

question 126

Multiple Choice

Consider two firms competing to sell a homogeneous product by setting price.The inverse demand curve is given by P = 20 − Q.Firm 1 has MC₁(Q₁) = 2 and firm 2 has MC₂(Q₂) = 2.25.Based on this information,we can conclude that the market price will be:

• A) $2 and each firm will produce 9 units.
• B) $2.25 and each firm will produce 8.875 units.
• C) $2.24 and firm 1 will produce 17.76 units and firm 2 will produce 0 units.
• D) $2 and firm 1 will produce 18 units and firm 2 will produce 0 units.

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